Cumulative Weighted Moving Average (CWMA)

Parameters: period = 14 (2–200)

Overview

The Cumulative Weighted Moving Average (CWMA) represents an advanced variation of weighted moving averages that applies progressively increasing weights to more recent data points while maintaining a cumulative memory of price history. Unlike standard WMA that assigns linear weights resetting each period, CWMA accumulates weights over time, creating superior responsiveness to market changes while filtering out short-term noise more effectively than traditional weighted averages.

This innovative approach makes CWMA particularly valuable for trend-following strategies in 2025, where capturing the latest trends quickly is crucial. By placing exponentially more importance on recent prices while maintaining historical context, CWMA acts as both a dynamic support/resistance level and an early trend reversal indicator, helping traders identify key entry and exit points with reduced false signals compared to standard WMA.

Interpretation & Trading Signals

Trend Following Signals:

  • Rising CWMA: Prices trending upward - bullish market with accelerating momentum
  • Falling CWMA: Prices trending downward - bearish market with accelerating momentum
  • Flat CWMA: Market consolidation or trend exhaustion - prepare for breakout
  • Slope Change: Early warning of potential trend reversal

Entry/Exit Strategies (2025):

  • Buy Signal: Price dips near or just below CWMA - favorable entry time
  • Sell Signal: Price moves towards or above CWMA - indication to exit trade
  • Dynamic Support: CWMA acts as support in uptrends - trail stops below
  • Dynamic Resistance: CWMA acts as resistance in downtrends - trail stops above

Advanced Applications:

  • Short-Term Trading: CWMA's responsiveness ideal for capturing latest trends quickly
  • Noise Filtering: Cumulative nature filters out price fluctuations better than WMA
  • Momentum Detection: Acceleration/deceleration visible through CWMA curve changes
  • Risk Management: Less false signals in volatile markets compared to standard WMA

Example Usage

Code examples will be available once the Rust implementation is complete.

Performance Analysis

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